MORNING Report: Risky Markets Unpleasant Despite Powell Gas

Powell, who gave a mid-year presentation on monetary policy to the Senate Banking Committee, didn’t give much clue as to what the Fed’s next step on monetary policy would be, Foreks said.

Reiterating that the Fed will keep interest rates near zero until the target of full employment and 2 percent inflation is reached, Powell did not reveal any signs of a change in the Bank’s bond buying policy.

“The economy is far from our employment and inflation targets, and significant progress toward meeting the targets is likely to take some time,” Powell said, adding that the Fed’s assessments of progress toward the targets continue to be communicated. openly with the market prior to any change in asset purchase velocity.

Given Powell’s comments, the DJ30 and the S & P500 managed to recover losses close to 1% and close the night with a slight plus. The yield on the US 10-year benchmark bond is also down to 1.34% from its intraday high of 1.40%. However, as the NASDAQ is down 0.5%, there are small-scale selling on major Asian stock exchanges this morning (06:45 CET). The MSCI Emerging Markets equity index in which Turkey is also included (GOI, Market = GOP) fell 0.27% as of yesterday.

This morning, the dollar index in Asia is hovering around 90.14 with a 0.11% premium. Spot gold is rising to 1.809 / ounce, while Brent is hovering between $ 65-66.

While Borsa İstanbul yesterday sold 2.11%, this morning the dollar / TL is trading in Asia between 7.08-09. Raw materials rally.

ANALYSIS: Find two, one sequence

Jay Powell didn’t give investors exactly what they wanted. Bond purchases will continue, but there are no new moves to reduce 10-30 year bond yields. The number one concern remains that if the Fed prints money and Joe Biden’s gigantic spending packages drive inflation higher, bond yields will continue to rise.

Therefore, risk assets have a hard time finding a direction. On the one hand, with the help of accelerated vaccination campaigns, there is an expectation that the world economy will accelerate and the company will increase its profits. On the other hand, US bond yields have risen.

Confusion regarding the US dollar continues. The euro / dollar is at 1.2155 this morning, but although the ECB has made it clear that it does not want a strong euro and high interest rates, the Fed is very comfortable with these issues. Risk assets, including the GOP, could be affected if the dollar index rises.

In emerging countries, in addition to rising bond yields and the potential for the dollar to strengthen, geopolitical risks are also vexing. Turkey among the AKP-CHP dollar raises the obvious cause of the Berat Albayrak dispute. Russia is under threat of sanctions between the United States and the EU. Egypt and the United States adopt the attitude towards human rights violations in Turkey, baffling fund managers. In Latin America, Bolsonaro disrupted the markets by firing GM from Petrobras. In China, it is expected how quickly the economy will recover after the long New Year holidays.

In terms of negative news, the construction of Turkey. Yesterday JP Morgan suggested an earnings realization on TL. Rising energy and commodity prices create the perception that the current account deficit will be a problem for a few more months, and the TL will slow in the upward direction, although the economy slows.

The biggest risk is Covid-19. While 75 more citizens lost their lives yesterday, the number of cases peaked for a month and exceeded 9,000. Under these conditions, normalization will start very slowly in March. The normalization of the economy in March and April is essential since foreign tourists book early during these months. Turkey cannot bear to miss more than a year of tourist season. How quickly President Erdogan will lift curfews and other restrictions affecting economic activity in March can determine the trend in the economy and markets.


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